The Hertz Corporation said Tuesday that it would spin off its equipment rental corporation, a move that would give the remaining company net proceeds of $2.5 billion.
The separation is planned as tax-free spinoff to Hertz shareholders and is expected to close by early 2015.
The rental equipment business has 335 branches in the United States, Canada, France, Spain, China and Saudi Arabia, as well as international franchisees. The business had $1.5 billion in annual revenue and rents out a broad range of equipment, including air compressors and tools, earth-moving equipment and power generators, forklifts and material handling, pumps, and trucks and trailers.
The company has been under pressure from activist investors. Late last year, the company adopted a one-year shareholder rights plan, commonly known as a poison pill, to thwart an investor from gaining control of the board.
The remaining company will be made up of the Hertz, Dollar, Thrifty and Firefly rental car businesses as well as Donlen, a provider of fleet leasing and management services. Hertz said it would use the proceeds to pay down debt and support a newly approved $1 billion share repurchase program. The share repurchases could reach 20 percent of Hertz’s outstanding shares of common stock.
“Through unbundling these undervalued assets, we unleash current and future shareholder value,†Mark P. Frissora, chairman and chief executive of Hertz, said in a statement. “In fact, we believe there is a potential for multiple expansion even if both businesses only trade in line with their peers.â€
